U.S. Metropolitan House Price Dynamics

46 Pages Posted: 10 Jan 2018

See all articles by Elias Oikarinen

Elias Oikarinen

University of Oulu - Oulu Business School; University of Turku, Department of Economics

Steven C. Bourassa

Florida Atlantic University

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

Janne Engblom

University of Turku - Turku School of Economics

Date Written: December 1, 2017

Abstract

Using data for 70 U.S. metropolitan areas, this study explores spatial heterogeneity in house price dynamics. We use recent advances in panel econometrics that allow for spatial heterogeneity, cross-sectional dependence, and non-stationary but cointegrated data. We test for spatial differences and analyze the relationship between the price elasticity of housing supply and the income elasticity of prices, as well as bubble size and duration. The long-term elasticity of house prices with respect to aggregate personal income averages 0.81, but varies considerably across metropolitan areas. The long-term income elasticity generally is greater in the more supply-inelastic metropolitan areas, and we show that bubble size and duration are inversely related to supply elasticity. Also short-term momentum and reversion dynamics show substantial spatial heterogeneity.

Keywords: house prices, dynamics, panel data, spatial heterogeneity, spatial dependence, bubbles

JEL Classification: C33, R15, R31

Suggested Citation

Oikarinen, Elias and Bourassa, Steven C. and Hoesli, Martin Edward Ralph and Engblom, Janne, U.S. Metropolitan House Price Dynamics (December 1, 2017). Swiss Finance Institute Research Paper No. 17-72, Available at SSRN: https://ssrn.com/abstract=3099094 or http://dx.doi.org/10.2139/ssrn.3099094

Elias Oikarinen (Contact Author)

University of Oulu - Oulu Business School ( email )

Finland

University of Turku, Department of Economics ( email )

Turku, FIN-20500
Finland

Steven C. Bourassa

Florida Atlantic University ( email )

777 Glades Road
Boca Raton, FL 33431
United States
5028077642 (Phone)

Martin Edward Ralph Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Janne Engblom

University of Turku - Turku School of Economics ( email )

Rehtorinpellonkatu 3
TURKU, FI-20500
Finland

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